Russia’s conflict economic system has reached a staggering scale that ought to alarm each European chief. Between 2022 and 2024, Moscow allotted at the least $263 billion to defence outlays — roughly 7% of GDP yearly — reworking an enormous portion of its economic system right into a military-industrial advanced on a scale that’s unprecedented because the Chilly Warfare. In the meantime, China simply tightened its grip on uncommon earth exports, giving Beijing the ability to doubtlessly veto European defence manufacturing. These aren’t hypothetical threats — they’re at present’s actuality, and Europe’s response has been far too sluggish.
The numbers inform a sobering story. Whereas European NATO members collectively spent roughly €343 billion on defence in 2023, this was unfold throughout 27 nations with fragmented procurement techniques and sluggish adoption of rising applied sciences. Russia, with an economic system smaller than Italy’s, has weaponized its complete industrial base with ruthless effectivity. The asymmetry isn’t simply in spending — it’s in velocity, focus, and willingness to embrace disruptive innovation.
Europe now faces a important alternative: proceed counting on legacy defence contractors working with decades-old procurement timelines, or quickly embrace the technological revolution reshaping trendy warfare. The proof from Ukraine is unambiguous: AI-powered drone swarms, autonomous techniques, and software-defined platforms are figuring out battlefield outcomes. But European governments stay hesitant to purchase from the progressive startups constructing these capabilities.
The Scale of the Problem
In our newly revealed European Resilience Roadmap, we define why defence expertise represents Europe’s single largest progress alternative and potential path to renewed European prosperity by dual-use improvements, in addition to its most important strategic crucial. European defence spending is projected to develop from €285 billion in 2021 to €970 billion by 2030 — a 3.4x improve pushed by NATO’s push towards 3.5% GDP commitments.
However cash alone received’t defend Europe. If capital flows primarily to legacy contractors constructing yesterday’s techniques, Europe will stay dangerously uncovered. The fashionable battlefield calls for autonomous drone swarms, AI-powered command and management, responsive space-based surveillance, and distributed manufacturing that may function even below assault.
Contemplate this distinction: Ukrainian forces working containerized 3D printing amenities close to entrance traces can design, print, and deploy drone countermeasures inside hours. Conventional European defence procurement cycles measure timelines in years, generally many years. This disconnect isn’t simply inefficient, it’s strategically harmful.
Breaking Vital Dependencies
China’s current export restrictions on uncommon earth parts expose one other vulnerability. Beijing controls roughly 90% of world uncommon earth magnet manufacturing — supplies important for industrial applied sciences comparable to iPhones, medical gear, MRI machines and electrical automobiles but additionally for defence use circumstances together with fighter jets (the F-35 comprises over 400kg and a Virginia class submarine requires greater than 4,000kg) and digital warfare techniques. Left unchecked, China’s new restrictions will nearly actually sluggish U.S. and European defence manufacturing inside months.
Europe’s over-reliance on Chinese language manufacturing and American defence expertise has created twin dependencies that undermine strategic autonomy. Breaking these requires huge funding in superior industrial manufacturing, from additive manufacturing amenities working in fight zones to autonomous factories able to 24/7 manufacturing surges.
European founders are already constructing options, with corporations like SAEKI in Switzerland pioneering on-demand additive manufacturing, or Germany’s RobCo offering modular robotic techniques. However they want authorities clients prepared to purchase at velocity and scale.
Studying from America
America spends roughly $877 billion yearly on defence, greater than the subsequent 9 international locations mixed. American defence expertise corporations profit from the Division of Warfare as an anchor buyer prepared to take dangers on progressive startups by packages like Small Enterprise Innovation Analysis (SBIR).
Europe can not match U.S. spending dollar-for-dollar. However it should match America’s willingness to embrace innovation. Essentially the most profitable European defence corporations will serve each European governments and the Division of Protection (DoD), leveraging transatlantic partnerships. Our portfolio firm Auterion demonstrates this: based by Europeans, deployed in Ukraine, scaling globally by partnerships with each European and American contractors.
5 Vital Domains
As we element in our European Resilience Roadmap, 5 expertise domains will decide Europe’s defence future: bodily autonomy throughout air, land, and sea; aerial defence; AI-powered command and management; area sovereignty; and superior industrial manufacturing. European startups are innovating throughout all 5 — from ICEYE’s all-weather surveillance satellites to cost-effective aerial protection techniques from Cambridge Aerospace and Tytan Applied sciences to ARX Robotics’ modular floor robots.
What Governments Should Do
European nations should essentially reform defence procurement:
- Speed up timelines from years to months for confirmed applied sciences
- Create SBIR-equivalent packages offering non-dilutive R&D funding
- Allow cross-border procurement so improvements scale throughout NATO allies
- Mandate interoperability requirements making certain techniques work collectively
- Reserve budgets particularly for non-traditional defence corporations
Most critically, governments should acknowledge that innovation more and more comes from sudden locations — corporations that began in industrial markets and convey essentially totally different approaches than legacy contractors.
The Backside Line
Russia has restructured its complete economic system for sustained army manufacturing. China controls important supplies important for contemporary defence. America maintains overwhelming technological superiority however with more and more unpredictable commitments. Europe can not afford to outsource its safety or delay embracing the innovation revolution reshaping warfare.
The businesses being based at present will outline Europe’s defence capabilities for 30 years. At Bessemer, we’re backing European defence innovators for the long run, connecting them to world markets, and offering affected person capital. The query is whether or not European governments will match that dedication with procurement reform and the urgency this second calls for.
The defence innovation race is already below manner. Europe wants to begin working.
The opinions expressed in Fortune.com commentary items are solely the views of their authors and don’t essentially replicate the opinions and beliefs of Fortune.
